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Casino groups express interest in troubled project

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Several casino and hotel operators and high net worth individuals that could provide funding to finish the bankrupt Fontainebleau Las Vegas have visited the Strip property recently, numerous sources said Friday.

The revelation comes as the Florida bankruptcy judge has told the project developer, the banks it is suing and an unnamed lender to sit down with a mediator to try to reach a solution that could get the stalled project going again.

At a hearing Wednesday, the Fontainebleau Las Vegas developer said a potential lender that it did not name is ready to provide financing to complete the stalled project if a group of banks would release money they had agreed to loan to the developer.

Two of the parties that reportedly toured the 70 percent completed property were from Harrah's Entertainment and Wynn Resorts, separate sources said.

Representatives from the management team at Harrah's and the company's owners, private equity firms TPG Capital and Apollo Management, toured the site earlier this month, according to three individuals.

Two other sources said that Steve Wynn, Wynn Resorts Chief Operating Officer Marc Schorr and other company officials toured the 24-acre site this week.

Harrah's Entertainment declined comment, and calls to Wynn Resorts on Friday were not returned.

All construction on the $3.1 billion project was stopped after the company filed for Chapter 11 bankruptcy on June 9. The developer blamed the bankruptcy filing on the decision by a group of lenders led by Bank of America to stop a $656 million loan. The lenders said they backed out of the loan agreement because of concerns about cost overruns and construction mismanagement on the project.

How much additional financing is needed to finish the project has not been made public, but the developer admitted to the lenders April 17 that there was a "substantial construction deficit," and additional funding would be needed, according to court filings.

News of the possible interest in the project comes a day after U.S. Bankruptcy Judge A. Jay Cristol ordered Fontainebleau, the banks and an unnamed possible lender to sit down with a mediator to try to resolve lending problems.

The judge said he believes the mediation was needed because the "financial implications of this dispute are vast" if the project is not restarted soon.

Continued litigation "can possibly result in losses to some party or parties of hundreds of millions or even over a billion dollars," Cristol wrote. "It would be in everyone's best interest if this matter could be resolved in a prudent businesslike manner rather than through litigation."

"This is the judge's decision and we intend to comply with his order and participate in the mediation," Bank of America, the lead lender on a $656 million loan that was withheld from the project, said in a statement Friday.

Fontainebleau spokesman Dave Satterfield said the developer shares the judge's desire for a quick solution without litigation.

"(We) will do our best to reach a mediated settlement on an expedited schedule while keeping all our legal options open," Satterfield said in a statement.

"Mediation is a tool bankruptcy judges are increasingly using to try and get parties to come up with solutions other than to see how much money they can spend on lawyers and fighting in court," said local bankruptcy attorney Rob Charles, who is not involved in the case.

The judge gave the developer and lenders until July 10 to agree on a mediator and set a date for mediation talks.

The judge said it is "deemed prudent" that the unnamed lender be invited to participate in the mediation.

The mediation order was issued a day after the judge granted in part the developer's motion for an expedited hearing on its $3 billion lawsuit trying to compel the banks to release the funding for the project.

Also Thursday, eight subcontractors with $112.4 million in mechanics' liens filed claims against Fontainebleau Las Vegas. The subcontractors are asking the trustee in the case to form a official contractor committee to jointly administer their cases.